Maximizing Efficiency, Minimizing Risk: Understanding the Common Interest Doctrine

5 December 2017

Introduction
The common interest doctrine provides that, if two or more separately represented entities with a common legal, factual, or strategic interest exchange information with each other and their respective lawyers, a communication that would otherwise qualify as privileged may remain privileged as against third persons. [1] Generally, the presence of a third party destroys the privileged nature of attorney-client communications. [2] But, under the common interest doctrine, a privileged communication may not be stripped of its privileged status due to the presence of a third party. [3] If certain conditions are satisfied, the doctrine permits parties with joint legal interests to share information candidly and pool mutual resources without fear of waiving privilege. Using the common interest doctrine to share information fosters collaboration among similarly-situated parties, promotes overall cost-sharing, and can help lawyers and clients address actual or threatened claims or defenses more efficiently.

The doctrine, though frequently invoked by lawyers in litigation or investigations involving multiple defendants, is often misunderstood. Some prosecutors even view the invocation of the common interest doctrine under a joint defense agreement to be a deliberate attempt by the defense to obfuscate fact-finding. For this reason, it is especially important that attorneys asserting privilege under the common interest doctrine understand the scope of the doctrine and stand ready to defend any discovery objections or privilege challenges on the basis of its tenets. Corporate, regulatory, or other attorneys likewise should understand how to invoke the common interest doctrine and maintain the privilege in the first instance when working with legal allies.

A lack of court instruction defining the more nuanced bounds of the doctrine may compound misunderstandings in this area. For example, what is a “legal interest” as opposed to a business interest? How does a court determine if a legal interest between parties is sufficiently “common?” Can client-to-client communications in the presence of an attorney, without the attorney actively advising or participating, be protected under the common interest doctrine? The jurisprudence on the common interest doctrine has failed to keep pace with the evolving way in which lawyers and their clients communicate. As a result, the federal circuits vary in how broadly or narrowly they choose to construe the doctrine. For this reason, it is particularly important that lawyers understand the scope and applicability of the common interest doctrine to preserve privileged communications. Failure to do so may result in the ultimate disclosure of sensitive client information.

This article details the recognized elements and scope of the common interest doctrine, including its application in the criminal, civil, regulatory, lobbying, and corporate contexts. Potential best practices for maintaining the integrity of the common interest privilege are also noted.

Scope of the Common Interest Privilege
Courts apply the common interest privilege to both litigation (criminal and civil) and non-litigation contexts. In the litigation context, communications may remain privileged between defendants, between plaintiffs, and even between litigants involved in separate lawsuits in certain circumstances. [4] Importantly, most courts only apply the common interest privilege to client-to-client communications when a lawyer is either present or has directed the communication; [5] which includes communications between a client and another client’s lawyers, whether or not the client’s own lawyer participates. [6] Some courts, however, permit the privilege to stand when any member of a “client set” (i.e., the clients, clients’ agents, clients’ lawyers, and lawyers’ agents) exchange communications, whether a lawyer is present or not. [7]

Courts also vary in their requirements for the type of common interest that ultimately triggers the privilege. The Restatement takes a fairly liberal approach, stating that the relevant common interest “may be either legal, factual, or strategic in character.” [8] Some courts have adopted the Restatement’s expansive definition and extended the privilege to situations where the shared interest is not strictly legal in nature. For example, the Federal Circuit held that communications between a patent developer and a patent licensee were privileged because both parties had the same interest in obtaining strong and enforceable patents.[9] Additionally, as discussed in more detail below, the court in Schaeffler extended the privilege to a taxpayer and his lenders who shared a common legal interest in the taxpayer's ability to obtain favorable tax treatment for the refinancing and restructuring of their transaction.

Courts also vary in the required level of alignment of the participants’ interests. For instance, some courts have found that any interests not completely adverse triggered the privilege, [10] some required only a strong identity of interests, [11] while others required identical interests. [12] Even if two parties have directly adverse interests in one matter, courts have extended the privilege to those parties when they share some other common interest in a separate matter. For example, communication was privileged for:

  • parties on opposite sides of a corporate acquisition because the companies shared a common interest in dealing with the acquired company's asbestos litigation liabilities; [13]
  • a plaintiff and a defendant who were defending against another defendant's counterclaims and cross-claims, respectively; [14]
  • parties who anticipated litigating against each other eventually; [15]
  • counsel for a bankruptcy debtor and counsel for a creditors' committee; [16] and
  • an insurance company and its insured, even when they disagreed about coverage. [17]

The timing and substance of the relevant communication is significant as well. Non-substantive communications or communications that do not further the common interest normally will not be protected. Similarly, communications occurring before a common interest agreement is in place are not usually privileged. While some parties have attempted to avoid this outcome by writing retroactivity provisions into the agreement, courts sometimes reject the participants’ selection of the applicable date for the common interest protection to begin, instead opting to pick their own date. [18]

Once a common interest agreement is in place, participants may not withhold communications from each other that they previously shared under a common interest agreement, even if they are now litigation adversaries. The adversity, however, usually does not require the participants to reveal privileged communications that had not been shared with the other participants.

Elements of the Common Interest Doctrine
The common interest doctrine, also known as the “joint defense doctrine” or the “community-of-interest” privilege, is recognized under federal common law. Before a court reaches the question of whether the common interest doctrine applies, however, it must first determine whether the attorney-client privilege exists at all. The existence of the common interest privilege depends on the underlying attorney-client privilege. Therefore, the party seeking to assert the common interest privilege has the “burden of establishing the elements of the attorney-client privilege generally. [19]

For the common interest doctrine to apply, most circuit courts require that: (1) the communications were made in the course of a joint defense effort; (2) the statements were designed to further the effort; and (3) the privilege has not been waived. [20]

Communications Must Be Made During the Course of a Joint Defense Effort
What constitutes a “joint defense effort,” and when does one begin? A joint defense effort can arise from an express agreement, whether written or unwritten, or it can arise from an implied agreement based on parties’ conduct. [21] However parties choose to manifest their agreement, the parties must demonstrate that the agreement existed before any disclosures were made.

For instance, in In re Pacific Pictures Corporation, the Ninth Circuit considered whether communications between a victim of a crime and the government could qualify for common interest doctrine protection. [22] The court found that “a shared desire to see the same outcome in a legal matter is insufficient” and that “the parties [must] make the communication in pursuit of a joint strategy in accordance with some form of agreement.” [23] In that case, there was no evidence that the parties agreed to any sort of joint legal strategy before making the disclosures in question, so there was no common interest doctrine protection. Stated differently, courts will not allow parties to use the common interest doctrine as a post-disclosure claw-back measure. Parties must demonstrate that the disclosure was preceded by some manifestation of an intended joint defense effort from the outset.

Similarly, the Fourth Circuit held that the common interest doctrine did not apply in the context of a grand jury subpoena requesting documents from telecom employees that related to an internal investigation conducted by the telecom company. [24] In this case, the employees and the company entered into a joint defense agreement in December 2001, but the interviews in question (the content which the parties sought to protect) occurred between March and June of 2001. [25] Again, even memorialized joint defense agreements typically cannot function retroactively.

A more difficult question is what precisely constitutes a “joint defense effort.” Courts typically evaluate the sufficiency of any joint defense effort by identifying shared legal, factual, or strategic interests on a case-by-case basis. As a general matter, courts will not extend the common interest protections to participants with merely common problems or a common desire to succeed in some action. [26] Rather, “only those communications made in the course of an ongoing common enterprise and intended to further the enterprise are protected. [27]

In United States v. Shaeffler, for example, the Second Circuit sought to evaluate whether a group’s common interest was of a sufficiently legal nature to warrant common interest protection. [28] Notably, in this case, the Shaeffler Court applied a common interest analysis in the commercial-transaction context. Shaeffler Group, an automobile parts manufacturer, entered into an agreement with a group of banks to finance a tender offer for Continental AG’s stock. While the Shaeffler Group intended to acquire a minority interest in Continental, the economic downturn of 2008 caused Continental stock prices to plummet before the tender closed. Therefore, the Shaeffler Group hired counsel and an accounting firm to restructure its debt and assess the tax consequences, knowing that it was likely to face an IRS challenge to its intended tax plan. In preparing for the IRS challenges, the Shaeffler Group shared privileged work-product materials with the bank under a common interest agreement. The IRS later subpoenaed these documents, but the Shaeffler Group withheld them on the basis of the common interest agreement.

The Second Circuit supported the Shaeffler Group’s decision to do so, finding that the communications were “made in the course of an ongoing common enterprise” and were “of a sufficient legal character to prevent a waiver[.]” [29] The financial interest of a party, no matter how large, does not preclude a court from finding that a legal interest also exists and is shared with another party where the legal aspects materially affect the financial interest. [30] Though no litigation was pending during the relevant time period, the Second Circuit found that both parties had a genuine interest in the outcome of the tax determination and that “the mutual obligations that [the parties] undertook under the agreement . . . reflect[ed] a common legal strategy. [31]

“Joint Defense Efforts” and the Requirement of Anticipated Litigation
At least part of the court’s formula in determining the legitimacy of purported “joint defense efforts” relies on the procedural posture of the dispute at hand. In evaluating the strength of the common interests among parties, courts vary widely in the degree to which they consider the progression of active litigation. For example, in most jurisdictions, a “palpable threat of litigation” that exists at the time of the communications is enough for the court to extend the common interest privilege. [32] Most federal courts do not require there to be any anticipated litigation to qualify for the privilege. [33] New York state courts, however, require pending or anticipated litigation for the doctrine to apply. [34]

Communications Must Be Designed to Further the Joint Legal Effort
The communications that parties seek to protect under the common interest agreement must have been made to further the joint legal effort, as explained above. Courts will look for early efforts by clients to engage attorneys to determine whether the client initially intended for a communication to further a legal effort. In United States v. Felci, the First Circuit considered whether information disclosed to a third party, allegedly as part of a joint defense effort, satisfied the common interest doctrine when the individual did not first disclose the information to his attorney. [35] The court held that, when the information is not first disclosed to an individual’s own attorney, “it is difficult to see how the information was given as part of a joint defense, even when the party may be viewed as a party with similar interests.” [36]

Conversely, in United States v. Schwimmer, a defendant was convicted of racketeering charges for his role in an employee-benefits scheme. [37] After the defendant became aware of the investigation, Schwimmer consulted with an attorney, who directed him to discuss the case with an accountant hired by his co-defendant. [38] The First Circuit found that these communications were privileged because the information “was imparted in confidence for the ultimate purpose of assisting attorneys who had agreed upon” a joint defense strategy. [39]

Privilege Has Not Been Waived
Finally, courts require that the privilege has not otherwise been waived with regard to the communication disclosed to a third party. Generally, the privilege only applies to communications made after the party sought—and an attorney gave—legal advice. Moreover, the parties must intend the communication to be confidential and must not communicate the information to a third party who is not a party to the existing common interest agreement.

Best Practices for Preserving Privilege
There are a number of “best practices” that lawyers and clients alike can follow to minimize the risk of the inadvertent disclosure of privileged documents and communications. First, any common interest often should be memorialized in writing before any party shares any type of information. The agreement should identify all parties to the common interest agreement, the specific nature of that interest (i.e., legal, factual, or strategic), and the pending or anticipated litigation expected to arise from an existing dispute—even though most courts do not require a writing to evidence the parties’ intent. In the corporate context specifically, parties should consider signing antitrust joint defense agreements in the due-diligence phase of any acquisition between two competitors before sharing any confidential information. The parties should also include an express provision in the acquisition document to memorialize the common interest with respect to the business being acquired.

In any common interest situation, the agreement will define the beginning and the end of the joint effort. Furthermore, executing the common interest agreement early in the parties’ dealings allows them to guard against partial disclosures by protecting all communications from the beginning to the end of the engagement.

Second, after executing the common interest agreement, parties should mark all privileged communications (even e-mails) with a header that reads “PRIVILEGED MATERIAL SUBJECT TO COMMON INTEREST AGREEMENT.”

Third, all relevant communications should use an attorney as the middleman between parties. As discussed above, there is contradictory precedent regarding whether a client-to-client communication can qualify for protection under the common interest privilege. To avoid this issue altogether, clients may use their lawyers to facilitate the exchange of all privileged information.

Fourth, lawyers should have a very particular purpose pursuant to the common interest agreement for sharing each piece of information between and among counsel. At each stage of preparing for litigation, an investigation, a lobbying effort, or a corporate transaction, an attorney should be able to pinpoint precisely how the communication relates back to the relevant common interest. The attorney may even wish to include a brief explanation of the purpose for sharing privileged material in communications with other attorneys.

Finally, attorneys should always remain cognizant of the basic attorney-client privilege rules. Attorneys should remind the lawyers for other parties to refrain from conduct that may otherwise waive the underlying attorney-client privilege. Without this privilege at the base, no common interest privilege can exist. Therefore, attorneys should confirm that the statements made under the common interest agreement qualify for attorney-client privilege protection. Furthermore, attorneys should preserve the integrity of the common interest privilege by reminding his or her own clients and representatives not to engage in conduct that could waive the privilege.


[1] Restatement (Third) of Law Governing Lawyers § 76 (2000).
[2] See Westinghouse v. Republic of the Philippines, 951 F.2d 1414, 1423 (3d Cir. 1991) (“It is well-settled that when a client voluntarily discloses privileged communications to a third party, the privilege is waived.”). See also United States v. Rockwell International, 897 F.2d 1255, 1265 (3d Cir. 1990) (“The attorney-client privilege does not apply to communications that are intended to be disclosed to third parties or that in fact are so disclosed.”) (emphasis added).
[3] Katz v. AT&T Corp., 191 F.R.D. 433, 436 (E.D. Pa. 2000) (“The common interest doctrine is the exception to the general rule that the attorney-client privilege is waived upon disclosure of privileged information with a third party.”).
[4] See B.E. Meyers & Co. v. United States, 41 Fed. Cl. 729, 734-35 (1998).
[5] See United States v. Mikhel, 199 F. App'x 627, 628 (9th Cir. 2006).
[6] See RLS Assocs. v. United Bank of Kuwait, PLC, 2003 WL 1563330 at *2 (S.D.N.Y. Mar. 26,
2003).
[7] See Restatement (Third) of Law Governing Lawyers § 76 cmt. d (2000); Gucci Am., Inc. v. Gucci, 2008 WL 5251989 at *1 (S.D.N.Y. Dec. 15, 2008).
[8] Restatement (Third) of Law Governing Lawyers § 76 (2000).
[9] See In re Regents of Univ. of Cal., 101 F.3d 1386, 1390 (Fed. Cir. 1996).
[10] See United States v. Moscony, 927 F.2d 742, 753 (3rd Cir. 1991).
[11] See United States v. McPartlin, 595 F.2d 1321, 1336 (7th Cir. 1979); McNally Tunneling Corp., 2001 WL 1246630 at *2 (N.D. Ill. Oct. 18, 2001).
[12] See ServiceMaster of Selina, Inc. v. United States, 2012 WL 1327812 at *3 (D. Kan. Apr. 17, 2012); United States v. Doe, 429 F.3d 450, 453 (3rd Cir. 2005); Green Edge Enters., LLC v. Rubber Mulch Etc., LLC, 2006 WL 2623855, at *1 (E.D. Mo. Sept. 12, 2006).
[13] See La. Mun. Police Emps. Ret. Sys. v. Sealed Air Corp., 253 F.R.D. 300, 310 (D.N.J. 2008).
[14] See United States v. McPartlin, 595 F.2d 1321, 1336 (7th Cir. 1979); McNally Tunneling Corp., 2001 WL 1246630 at *2.
[15] See In re Megan-Racine Assocs., Inc., 189 B.R 562, 572 (Bankr. N.D.N.Y. 1995).
[16] See Value Prop. Trust v. Zim Co. (In re Mortgage & Realty Trust), 212 B.R. 649, 653 (Bankr. C.D. Cal. 1997).
[17] See Kingsway Fin. Servs., Inc. v. Pricewaterhouse-Coopers LLP, 2008 WL 4452134, at *7 (S.D.N.Y. Oct. 2, 2008); Coregis Ins. Co. v. Lewis, Johs, Avallone, Aviles & Kaufman, LLP, 2006 WL 2135782, at *15 (E.D.N.Y. July 28, 2006).
[18] See Intex Recreation Corp. v. Team Worldwide Corp., 471 F. Supp. 2d 11, 16 (D.D.C. 2007).
[19] United States v. LeCroy, 348 F.Supp.2d 375, 382 (E.D. Pa. 2005).
[20] Matter of Bevill, Bresler & Schulman Asset Mgmt. Corp, 805 F.2d 120, 126 (3d Cir. 1986); see also Shaeffler v. United States, 806 F.3d 34, 40 (2d Cir. 2015) (holding that “only those communications made in the course of an ongoing common enterprise and intended to further the enterprise are protected”); In re Pacific Pictures Corp., 679 F.3d 1121, 1129 (9th Cir. 2012) (“the parties must make the communication in pursuit of a joint strategy in accordance with some form of agreement – whether written or unwritten”); In re Grand Jury Subpoena, 415 F.3d 333, 341 (4th Cir. 2005) (“For the privilege to apply, the proponent must establish that the parties had “some common interest about a legal matter” . . . “some form of joint strategy is necessary”); In re Grand Jury Subpoena, 274 F.3d 563, 572 (1st Cir. 2001) (“The joint defense privilege protects communications between an individual and an attorney for another when the communications are ‘part of an ongoing and joint effort to set up a common defense strategy.’”); In re Santa Fe Int’l Corp., 272 F.3d 705, 711 (5th Cir. 2001) (“[The common interest privilege] extends to communications made among persons ‘who consult an attorney together as a group with common interests seeking common representation’”) (citation omitted); In re Grand Jury Proceedings, 156 F.3d 1038, 1043 (10th Cir. 1998) (requiring either express or implied evidence of a joint-defense agreement and a furtherance of the “putative joint-defense strategy.”); United States v. Evans, 113 F.3d 1457, 1467 (7th Cir. 1997) (holding that the common interest doctrine “generally allows a defendant to assert the attorney-client privilege to protect his statements made in confidence not to his own lawyer, but to an attorney for a co-defendant for a common purpose related to the defense of both”); In re Grand Jury Subpoena Duces Tecum, 112 F.3d 910, 922 (8th Cir. 1997) (the common interest privilege applies “not only if litigation is current or imminent but . . . whenever the communication was made in order to facilitate the rendition of legal services to each of the clients involved in the conference”).
[21] In re Pac. Pictures Corp., supra at n. 20; see also United States v. Gonzalez, 669 F.3d 974 (9th Cir. 2012).
[22] Id.
[23] In re Pac. Pictures Corp., 679 F.3d at 1129.
[24] In re Grand Jury Subpoena, 415 F.3d 333, 336, 341 (4th Cir. 2005).
[25] Id. at 341.
[26] See, e.g., In re Pac. Pictures Corp., 679 F.3d at 1129 (holding that the “victim” did not have common legal interest with the government due to a “shared desire to see the same outcome in a legal matter”).
[27] See United States v. Schwimmer, 892 F.3d 237 (2d. Cir. 1989).
[28] United States v. Shaeffler, 806 F.3d 34 (2d Cir. 2015).
[29] Id. at 40-41.
[30] Id. at 41.
[31] Id.
[32] In re Santa Fe Int’l Corp., 272 F.3d 705, 711 (5th Cir. 2001); see also Allied Irish Banks, P.L.C. v. Bank of America, N.A., 252 F.R.D. 163, 171 (S.D.N.Y. 2008); In re Grand Jury Subpoenas 89-3 & 89-4, 902 F.2d at 249; Autobytel, Inc. v. Dealix Corp., 455 F. Supp. 2d 569, 576 (E.D. Tex. 2006); Metro Wastewater Reclamation Dist. v. Continental Cas. Co., 142 F.R.D. 471, 479 (D. Colo. 1992).
[33] See Teleglobe Commc'ns. Corp. v. BCE Inc., 493 F.3d 345, 364 (3rd Cir. 2007); United States v. BDO Seidman, LLP, 492 F.3d 806, 816 (7th Cir. 2007); La. Mun. Police Emps. Ret. Sys. v. Sealed Air Corp., 253 F.R.D. 300, 309-11 (D.N.J. 2008); In re Regents of Univ. of Cal., 101 F.3d 1386, 1390-91 (Fed. Cir. 1996) (“Persons seek legal advice and assistance in order to meet legal requirements and to plan their conduct; such steps serve the public interest in achieving compliance with the law and facilitating the administration of justice, and indeed may avert litigation . . . When such pre-litigation advice and assistance serve a shared legal interest, the parties to that interest do not lose the privilege when litigation arises.”) (citations omitted).
[34] But see Ambac Assur. Corp. v. Countrywide Home Loans, Op. No. 80, 2016 WL 4188989 (N.Y. June 9, 2016) (holding that the common interest doctrine applies to separately represented parties only if there is pending or anticipated litigation).
[35] United States v. Felci, 874 F.2d 20, 29 (1st Cir. 1989).
[36] Id.
[37] United States v. Schwimmer, 892 F.2d 237, 238 (2d Cir. 1989).
[38] Id. at 244.
[39] Id.

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